PayPal has agreed to acquire Xoom for $890 million, as the consumer payments company looks to expand into the international remittances business.

PayPal said it will pay $25 per share in cash, a 32% premium over Xoom's three-month average stock price. PayPal said it will use cash on its balance sheet to pay for the deal, which it expects to be "slightly dilutive" to non-GAAP earnings per share in fiscal 2016.

The deal comes at a time of heavy investment in the fintech sector, as startups flush with venture capital increasingly seek ways to innovate and challenge incumbent players in the heavily regulated financial services industry. A report released this week by the World Economic Forum identified remittances, Xoom's specialty, as one area where nontraditional providers could offer a "meaningful alternative" to financial institutions.

The deal has been approved by the directors of Xoom, PayPal and eBay, the parent of PayPal. The parties expect the acquisition to close in the fourth quarter.

PayPal is being spun off from eBay, with the move expected to be finalized on July 20.

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